Intercompany Transactions

A wholly owned subsidiary sold land to its parent during the year at a gain. The parent
continues to hold the land at the end of the year. The amount to be reported as consolidated
net income for the year should equal:

• the parent's separate operating income, plus the subsidiary's net income.
  

• . the parent's separate operating income, plus the subsidiary's net income, minus the
  intercompany gain.
  

• the parent's separate operating income, plus the subsidiary's net income, plus the
  intercompany gain.
  

• the parent's net income, plus the subsidiary's net income, minus the intercompany gain.
  

ABC Corporation purchased land on January 1, 2006, for $50,000. On July 15, 2008, it sold
the land to its subsidiary, XYZ Corporation, for $70,000. ABC owns 80 percent of XYZ's
voting shares.
Based on the preceding information, what will be the workpaper eliminating entry to
remove the effects of the intercompany sale of land in preparing the consolidated financial
statements for 2008?

• 
• 
• 
• 

Pied Imperial Corporation acquired a 90% interest in Somest Corporation in 2012 when Somest's book
values were equivalent to fair values. Somest sold equipment with a book value of $80,000 to Pied for
$130,000 on January 1, 2014. Pied is fully depreciating the equipment over a 4-year period by using the
straight-line method. Somest reported net income for 2014 was $320,000. Pied's 2014 income from Somest
was

• $249,250
  

• $250,500
  

• $254,250.
  

• $288,000.
  

Pogo Corporation acquired a 75% interest in Sperry Corporation on January 1, 2011 at a cost equalto
book value and fair value. In the same year Sperry sold land costing $25,000 to Pogo for $50,000. On July 1,
2014, Pogo sold the land to an unrelated party for$85,000. What was the gain on the sale of the land on
the consolidated income statement for 2014?

• $25,000
  

• $35,000
  

• $45,000
  

• $60,000
  

Parrot Corporation acquired a 70% interest in Swifti Corp. on January 1, 2013, when Swifti's book
values and fair values were equivalent. On January 1, 2014, Swifti sold a building with a book value of
$60,000 to Parrot for $80,000. The building had a remaining life of five years, no salvage value, and w as
depreciated by the straight-line method. Swifti reported net income of $200,000 for 2014. What was the
noncontrolling interest share for 2014?

• $54,000
  

• $55,200
  

• $60,000
  

• $128,800
  

In 2014, Parla Corporation sold land to its subsidiary, Sidd Corporation, for $38,000. It had a book value of
$24,000. In the next year, Sidd sold the land for $41,000 to an unaffiliated firm
1) Which of the following is correct?

• No consolidation working paper entry is required for this transaction in 2014.
  

• A consolidation working paper entry is required only if the subsidiary was less than 100% owned in
  2014
  

• A consolidation working paper entry is required each year that Sidd has the land.
  

• A consolidation working paper entry was required only if the land was held for resale in 2014.
  

In 2014, Parla Corporation sold land to its subsidiary, Sidd Corporation, for $38,000. It had a book value of
$24,000. In the next year, Sidd sold the land for $41,000 to an unaffiliated firm
The 2014 unrealized gain from the intercompany sale is ?

• should be recognized in consolidation in 2014 by a working paper entry
  

• should be eliminated from consolidated net incom e by a working paper entry that credits land for
  $14,000
  

• should be eliminated from consolidated net incom e by a working paper entry that debits land for
  $14,000.
  

• should be eliminated from consolidated net incom e by a working paper entry that credits gain on sale
  of land for $14,000.
  

On January 1, 2014, Bigg Corporation sold equipment with a book value of $20,000 and a 10-year
remaining useful life to its wholly-owned subsidiary, Little Corporation, for $30,000. Both Bigg and Little
use the straight-line depreciation method, assuming no salvage value. On December 31, 2014, the separate
company financial statements held the following balances associated with the equipment:

1)A working paper entry to consolidate the financial statements of Bigg and Little on December 31, 2014
included a

• debit to equipment for $10,000.
  

• credit to gain on sale of equipment for $10,000
  

• debit to accumulated depreciation for $1,000.
  

• credit to depreciation expense for $3,000
  

On December 31, 2014, Pinne Corporation sold equipm ent with a three-year remaining useful life and a
book value of $21,000 to its 70%-owned subsidiary,Sull Company, for a price of $27,000. Pinne boughtthe
equipment four years ago for $49,000. The salvage value is zero. Straight-line depreciation is used by both
companies

An elimination entry at December 31, 2014 for the intercompany sale will include a

• credit of $6,000 to Depreciation Expense
  

• credit of $6,000 to Accumulated Depreciation.
  

• credit of $6,000 to Gain on Sale of Equipment.
  

• credit of $6,000 to Equipment
  

Par Company sells land with a book value of $5,000 to Sub Company for $6,000 in 2011. Sub Company holds the
land during 2012. Sub Company sells the land for $8,000 to an outside entity in 2013.

Which of the following statements is true?

• Under the equity method, Par Company’s Investment in Sub account will be $1,000 less than its underlying equity in Sub throughout 2012
  

• No workpaper adjustments for the land are required in 2012 if Par Company has applied the equity
  method correctly.
  

• method correctly.
  c A workpaper entry debiting gain on sale of land and crediting land will be required each year until the
  land is sold outside the consolidated entity.
  

• In 2013, the year of Sub’s sale to an outside entity, the workpaper adjustment for the land will include a
  debit to gain on sale of land for $2,000.